Context:
The Union government, through a notification dated 21 March, has amended the definitions of micro, small, and medium enterprises (MSMEs). The updated definitions raise the thresholds for investment in plant and machinery and turnover, effective from this financial year.
Implications of the Changes
- Reclassification Benefits: Many medium-sized enterprises will now fall under the ‘small enterprise’ category.
- Access to Government Benefits: This reclassification grants broader access to:
- The Government e-Marketplace (GeM) for procurement.
- Dispute resolution services for delayed payments.
Legal Context Under the Micro, Small, and Medium Enterprises Development (MSMED) Act of 2006, only micro and small enterprises previously qualified for benefits like dispute resolution through the Micro and Small Enterprises Facilitation Councils (MSEFCs). Medium enterprises were excluded.
Addressing Delayed Payments
- Chronic Issue: Delayed payments have been a persistent issue, especially for micro and small firms dealing with larger corporations.
- Expanded Access to Redressal: With the new definitions, more firms can now seek arbitration, conciliation, and mediation via MSEFCs.
- Current Status: Out of ₹28,398 crore in pending dues from 92,794 cases, MSEFCs have resolved 50,507 cases amounting to ₹8,740 crore (as of 12 March), according to the Samadhaan portal.
Boost in Market Access
- Under the Public Procurement Policy, all ministries and PSUs must source at least 25% of their needs from micro and small enterprises.
- With redefined categories, more MSMEs can participate in government procurement via GeM.
Government’s Broader Vision Finance Minister Nirmala Sitharaman, in the Union Budget 2025–26, emphasized that expanding MSME definitions would:
- Enhance scale efficiencies
- Support technological upgrades
- Improve access to capital
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